Estate Tax Exposure of Family Limited Partnerships Under Section 2036

Abstract

Recently, a district court in Texas decided Kimbell v. United States, the first case in which a court applied I.R.C. sec. 2036 in the family limited partnership context based on the structure of the arrangement as opposed to the decedent's continued use of the partnership property for personal purposes. This theory represents a way in which the Internal revenue Service could combat the use of family limited partnerships to generate valuation discounts. This article discusses limited partnerships as an estate planning vehicle and outlines the manner in which I.R.C. sec. 2036 could be applied to property transferred to a family limited partnership. Finally, the Article concludes with a discussion of how the Tax Court could apply I.R.C. sec. 2036 when it decides Estate of Strangi on remand.